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Comparing the Cost of Cloud vs. Colocation
Is colocation cheaper than using a cloud computing services to run the same workload? It is if you run highly-utilized servers, according to Vijay Gill, who recently ran a comparison using Amazon Web Services pricing as a benchmark. Gill is the Senior Manager of Production Network Engineering and Architecture at Google, and knows a few things about data center cost analysis.
Gill posted a spreadsheet outlining his analysis, which finds that an equivalent workload would cost $118,248 at Amazon and $70,079 in a colocation facility. Some commenters have critiqued Gill’s data, but his downloadable spreadsheet allows users to plug in different variables, providing a tool to evaluate the economics of different approaches and workloads.
“Think of it as taking a taxi vs. buying a car to make a trip between San Francisco and Palo Alto,” writes Gill. “If you only make the trip once a quarter, it is cheaper to take a taxi. If you make the trip every day, then you are better off buying a car. The difference is the duty cycle. If you are running infrastructure with a duty cycle of 100%, it may make sense to run in-house.”
A duty cycle refers to the percentage of time a hardware asset is in use. Getting peak efficiency out of hardware is a key focus for Google, but the colo math won’t work as well for companies that get less mileage out of their servers. But cloud platforms will be more attractive to companies with lower hardware utilization.
“Very few businesses run at 100 percent utilization,” notes Katy Dormer, public relations manager for Amazon Web Services. ”In fact, 15 to 20 percent utilization is more the norm. A key benefit of Amazon Web Services is that you only pay for the services when you are actually using them. ”
Dormer also noted that users running at 100 percent utilization would likely purchase three year Amazon Reserved Instances, which provide savings of nearly 50 percent compared to using On-Demand Instances included in Gill’s model. Amazon offers an AWS Economics Center with tools and white papers to help users analyze costs associated with cloud computing.
Carol Brooks at SearchCloudComputing reviews some of the many calculators for analyzing return on investment on various cloud platforms.
But Gill’s post and spreadsheet offer additional data points for companies analyzing the most cost-effective way to deploy growing infrastructures.
About Rich Miller
Rich Miller is the founder and editor-in-chief of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.
This dynamic is pretty well understood by many who have been analyzing cloud computing for awhile which is why cloud is seen as a great fit for “bursty”, irregular and one-off intensive computing workloads. When the price of cloud is lowered through volume, then adopting cloud for all workloads will become more popular.
Monday data center tidbits: #cloudcomputing liability, crippling servers to cool | The Server Room
Posted August 23rd, 2010[...] up is a piece about comparing colocation to cloud computing. The key here is the potential customer’s server utilization. Without cloud computing, I [...]
I think the cost of Cloud computing is going to continue to decline. I think very few businesses will benefit from hosting their own cloud unless they are very large enterprises. Once the perception of security is addressed and with the convergence of cheap bandwidth and falling hardware costs. Cloud computing is here to stay and is going to be the standard operating procedure.
What We’re Reading About the Cloud
Posted August 23rd, 2010[...] Comparing the Cost of Cloud vs. Colocation (From Data Center Knowledge) No one who’s talking objectively about cloud computing posits that it’s the solution for every user. As this comparison finds, organizations with steady workloads and high utilization might be better off owning servers. [...]
I agree that the cloud is currently good for “bursty,” irregular and one-off intensive computing workloads, and that cloud computing costs are going to decline, making them more attractive for customers who don’t have 100% utilization of their data centers. What isn’t mentioned is the potential cost of not being able to provide the service, or not having control over the data center itself – two key issues. Until the service levels and the security of cloud providers get sorted out, those unknown/potential costs could further diminish the value of having the cloud available.
There are a lot of very good, cost-effective co-location providers out there, and they can provide the infrastructure and the guarantees that make co-location a great option. The cloud guys aren’t there yet.
Google exec compares colocation cost to cloud computing, critics say apples to sausage - Data center facilities pro
Posted August 25th, 2010[...] Gill published a blog post comparing the cost of Amazon Web Services to colocation. On Monday, Rich Miller at Data Center Knowledge directed readers’ attention to the cost analysis, where Gill’s post drew criticism for [...]
Comparing the Cost of Cloud vs. Colocation | Managed Hosting News
Posted August 27th, 2010[...] colocation cheaper than using a cloud computing services to run the same workload? It is if you run highly-utilized servers, according to Vijay [...]
Atlanta Data Center
Posted October 9th, 2010I think the cost of Cloud computing is going to continue to decline and that is good for the consumers
Cloud vs. Colocation : Data Cave
Posted November 1st, 2010[...] Center Knowledge has an interesting piece comparing the cost of the cloud vs. traditional colo model. An interesting exerpt: …which [...]
What folks fail to mention in all this “flexible computing” banter is that in addition to the cyclicle nature of your business as it applies to computing is the need to adjust and update the computing systems themselves.
Folks consider their entire environment whe looking at the ability to “flex” their computing needs which is entirely incorrect.
How many resources that make up a given online comuting environment can simple be shutdown and deleted to be recreated latrer from a static impage?
Maybe your front end web services assuming your website is largely static or content housed elsewhere 
… that “elsewhere” is a big caveat
It’s likely a middleware or backend layer that can never be shut down.
Can we spin down and spin up email servers? NO, directory services NO, databases? NO, print/fileshare/dynamic content…. NOT Likely
Can we spin up/down our webservers? YES… er … MAYBE
All I’m saying is that if your environment uses a given number of devices/servers only a portion (Likely a small portion) can take advantage of the flexibility of the elastic clouds therebye significantly limiting their cost savings potential
Rich
Posted April 12th, 2012Yes well done Gill, making sure cost is the only point emphasised here. It is just basic facts that cloud and co-lo are more expensive than building your own facility. As a well designed and built Data Centre will last you 10 / 15 years try looking at the return on investment rather than upfront costs. Cloud has been very well marketed but you just have to look at the small print to understand that the only silver lining is for the provider.
RESOURCE LINKS:
Building A Cloud-Savvy Model for TCO and ROI
How Storage is Shaping The Cloud Data Center
Bringing Colo to the Customer: Modular Gets Local
Microsoft’s $1 Billion Data Center
August 23rd, 2010